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Are you managing reputation risks strategically?cdn. · PDF file Are you managing reputation...

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  • Are you managing reputation risks strategically?

    Reputation: a strategic asset Reputation risk is an increasingly relevant strategic issue for organizations because there is so much at stake. A tarnished image can severely impact an organization’s ability to sell products, recruit staff and attract investors. Unfortunately, reputation damage may emerge from seemingly minor issues which can deteriorate very quickly with little notice or recourse. So while reputation risk deserves to be managed like other strategic risks, it is not often addressed adequately.

    Your organization works hard to maintain a good reputation through high-quality products and excellent customer service, dependably delivered. You make decisions for your organization based on how it will affect your image. Over time, this will build brand loyalty. Consumers are 350 percent more likely to purchase products of highly regarded companies, according to the US Reputation Pulse.1 It’s easy to recognize that a strong reputation is a cornerstone of a successful business. But it is far more challenging to understand and address potential threats to your group’s reputation.

    The reality is that when it comes to managing reputation risk, many organizations tend to practice ‘damage control.’ While this addresses issues that have already occurred, a more proactive approach can address issues that are likely to emerge. Understanding your potential for reputation risk can be challenging because it is very difficult to measure. However, any organization can benefit from developing an early warning process to help identify reputation risk and get out ahead of a threat before it can cause damage. The purpose of this article is to raise awareness of the reputation risk your organization faces and identify tools available to defend against it through strategic reputation management.

    Reputation risk: the accelerating factors

    Surprisingly, social media is not a consideration for 33 percent of C-suite-level respondents, according to a 2010 survey by the Economist Intelligence Unit.2 This is alarming, as the social media space continues to clearly demonstrate the power of its influence. Various social media sites and blogs have recently acted as incubators for activist movements around the world, fostering social uprisings and enabling communities to organize incredibly quickly to advance their agendas. These sites are highly accessible thanks to the proliferation of mobile devices across the majority of the global population. Similarly, organizations increasingly leverage technology in every aspect of their operations, such as utilizing a variety of e-commerce tools. This may increase efficiency, but it also makes the organization susceptible to IT security breaches that can destroy customers’ confidence and trust. For these reasons, technology is a reputation risk factor that cannot be ignored.

    Reputation risk

    Reputation risk January 2012


  • Other accelerating forces include 24-hour news channels and sensationalist media outlets. They can quickly cause a negative news story to spiral out of control, and possibly bring your company down with it. In order to manage this risk, you must truly understand how these new media sources can affect reputational issues. For example, journalists work in a small community, relying on each other to discover newsworthy stories. They often follow the leader to bring the story to their respective audiences. By identifying the influential opinion leaders, an organization can begin to manage the stream of information. Proactively managing your organization’s reputation may seem like a daunting task, but it can be achieved through practical steps.

    Techniques to manage reputation risk

    Early detection of a reputation risk is vital to your company, so the tools and tactics your organization uses should help identify issues as early as possible. Only then can proactive steps be taken before a crisis occurs. “If your organization addresses an issue early on, you can monitor the results of your own response and set strategy accordingly,” said Linda Conrad, Director of Strategic Business Risk at Zurich. This can provide a more timely indication of whether the issue is likely to dissipate or continue to grow, allowing for the appropriate amount of effort to resolve it.

    Identify and analyze stakeholder groups

    It is key to recognize your organization’s various stakeholder groups and balance the differing interests. For instance, internal stakeholders (i.e. – employees and investors) will have interests different from external ones (i.e. - customers, regulators, media, analysts and counterparties). Also, consider the wider public, which may have no stake at all under normal circumstances.

    Once the salient internal and external groups are identified, it is necessary to analyze these groups to understand how they may react to various types of developments and scenarios. The questions in the box to the lower left can assist you in starting to develop a stakeholder profile.

    Incorporate stakeholder analysis into operational strategy and tactics

    By understanding the profile of each of the groups that has a stake in your organization, you may begin to align internal strategy. It is crucial to identify the departments within your organization that communicate with each group, and whether these departments should interact with each other.

    For example, you may achieve certain objectives if your Marketing and Corporate Social Responsibility departments communicate consistently to their respective stakeholder groups on certain issues. Failing to do so could cause unintended damage to the organization’s reputation.

    Measure and monitor threats to reputation

    One approach to the measurement of reputational risk is the establishment of Key Risk Indicators (KRI’s). This can facilitate identification of negative trends as early as possible. KRI’s are data points used to monitor specific risk issues. Surveys that capture information from current employees and exit interviews from departing ones offer valuable information.

    Third parties can be contracted to solicit feedback from customers and other external stakeholders. These surveys can establish Key Reputation Risk Indicator trends to help an organization understand its perception with each stakeholder group. While this information is valuable, it still might not provide an early enough warning for many of today’s rapidly developing risks. To stay ahead, an organization must monitor information in real time. Techniques to track reputation in real time include internet monitoring, media monitoring and strategic media intelligence.

    • Internet monitoring Internet monitoring is an effective way to stay abreast of your organization’s reputation and position. Some sites enable you to monitor search terms for free by subscribing to a specific query (i.e. – “Acme Corp.”), alerting you whenever it appears. This can help build a basic understanding of the reputation and is a common place to start before engaging in more sophisticated practices.


    Reputation risk

    Understanding stakeholder groups

    - Who are they? (demographics, psychographics, geographical dispersion, etc.)

    - How big is their group?

    - What are their tendencies?

    - Are they loosely organized or strongly led?

    - Does the group consist of sub-groups?

    - To what media sources do they subscribe?

  • • Media monitoring Media monitoring (often called ‘clipping’) services offer a more advanced option to understand the evolving image of your organization. Many firms offer customized monitoring services, with simple services starting at reasonable rates. These services troll the internet for any mention of the client, and can include mainstream electronic news sources, social media outlets, blogs and forums. Also, multiple search terms can be used to include key products, executives, competitors, etc. Each hit is ‘tagged’ by the search engine, so that it can be compiled into a dashboard report for the client. Clipping services rely almost exclusively on sophisticated software programs, so important information is often missed. Even the most sophisticated algorithms used by clipping services are susceptible to linguistics errors. For instance, a software tool can misinterpret a message completely when it fails to identify sarcasm used by the source. Also, paraphrased quotations are difficult to identify and likely will not appear in the results. Or, if a source cites both positive and negative points, the software may be unable to determine the overall tone. For these reasons, clipping services may not be sufficient for large organizations that need more detailed information on public perception in order to act strategically.

    • Strategic media intelligence Strategic media intelligence builds a true understanding of what makes up an organization’s reputation, and what steps should be taken to proactively manage it. Highly specialized firms analyze the media by filtering out irrelevant information, determining influential sources and predicting outcomes. This approach helps the organization leverage media to target its distinct stakeholder groups, enhancing effectiveness of media relations activities and integrating brand management into strategic decision-making. These media intelligence firms advise clients on how to effectively dilute negative stories, thus enabling the organization to overcome them. This is possible by maintaining a consistent media prese

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